Washington Slashes Estate Tax: Why Your Inheritance Still Isn't Safe

Just as the dust seemed to settle on Washington's tax code, the Evergreen State is once again shifting its fiscal identity.

Historically a "no-income-tax" state, Washington broke a 90-year streak in 2021 by implementing a capital gains tax. Then, only last year, lawmakers enacted a record-breaking estate tax hike, pushing the top rate to 35% — the highest state "death tax" in the nation.

The hike was intended to address income inequality and generate revenue for public services, like education and child care. Following concerns from business leaders regarding a potential "wealth exodus," though, state lawmakers pursued a legislative retreat.

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Senate Bill 6347, recently signed by Gov. Bob Ferguson, reverses the estate tax increase. But the relief comes with a significant trade-off: A new 9.9% Washington "millionaire tax" on income. Here's why your heirs might not be out of the woods yet.

Washington estate tax exemption for 2026

Washington is currently in a rare "split" year for estate taxes. Depending on when an estate is settled, two different sets of rates and exemptions might apply.

For the first half of 2026, Washington's estate tax remains at the record highs set last year. However, SB 6347, just signed by Ferguson, "reverses" the higher estate tax changes, starting July 1, 2026.

Note on the "frozen" exemption: Currently, the exemption rises annually with inflation. However, the reversal bill lowered the exemption to $3,000,000 (the level at the end of last year) and froze the amount until 2027.

Washington estate tax rate for 2026

The Washington estate tax reversal significantly lowers the tax rate for large estates. At the same time, the recently enacted law lowers the estate tax exemption threshold, meaning more moderately sized estates might find themselves back in the Washington filing pool.

As the tax rates and exemptions on Washington estates shift, so does the final bill for your heirs. According to analysis by the ELG Estate Planning law group, the "reversion" might create two different outcomes:

• The $5 million estate: Under the current 2026 law (until June 30), an estate of this size could face a Washington tax bill of roughly $250,000. Under the reversal law, the same estate might pay approximately $361,050. This is a higher tax bill of over $111,000 due to a lower estate tax exemption amount. (Though, since the exemption amount is raised, the final tax bill might be lower than estimated.)
• The $10 million estate: Under the current 2026 law (until June 30), a $10 million taxable estate could result in $1.33 million in estate taxes. With the recently enacted reversion, the bill could drop to roughly $1.26 million — thanks to a lower estate tax rate.

In the latter example, heirs might keep over $72,000 that would have otherwise gone to the state. Those funds could stay in your family’s accounts.

But is this "death tax" relief enough to offset Washington residents' tax woes?

Washington estate taxes: Legislative changes

While last year's estate tax hike was designed to bolster public services, its rapid reversal in 2026 was fueled by indications of a "wealth exodus" from the Evergreen State.

"We do have a lot of anecdotal evidence that people are making a decision to redomicile," state Senate Majority Leader Jamie Pedersen (D-Seattle) told KOMO News outside the legislative session. "And I think it's worth taking that seriously."

A 2026 Association of Washington Business (AWB) survey revealed that 44% of Washington business leaders are considering moving their personal residences out of the Evergreen State, citing a rising tax burden as a primary motivator.*

This sentiment follows a string of higher-income departures:

• In March 2026, Starbucks announced it would open a new corporate office in Nashville, Tennessee, a tax-friendly state with no income taxes, and move some operations and personnel there.
• According to data reported by SmartAsset, Washington now ranks 8th worst in the nation for the net loss of high-earning millennials. In the year following the rollout of its capital gains tax, the state saw a net departure of 222 households earning over $200,000.

However, not everyone agrees that so-called "wealth taxes" are a primary cause of out-migration. The Center on Budget and Policy Priorities considers other factors — like cost of living, housing, climate, and family ties to weigh more heavily on interstate moves.

Plus, the state's "anti exodus" strategy remains counterintuitive: Even as lawmakers retreat on estate taxes, they have doubled down on a new 9.9% "millionaire tax." For many of the state's wealthiest, the message may be mixed.

*Note: The Winter 2026 AWB survey was conducted online with 429 employers across various industries and employee numbers.

Washington millionaire income tax

As reported by Kiplinger, another part of Washington's 2026 proposed tax package is the controversial "millionaire tax." Gov. Ferguson, who championed the bill during the 60-day legislative session, is expected to sign Senate Bill 6346 into law by early April.

While the estate tax has been rolled back to entice the wealthy to stay, this new levy is designed to capture revenue from Washington's highest earners — though not immediately.

Key provisions of the Washington millionaire's tax:

• The rate is a flat 9.9% tax on Washington taxable income.
• The tax threshold applies to income exceeding $1 million per year.
• Notably, the $1 million threshold applies per household, meaning a single filer and a married couple filing jointly both share the same $1 million deduction — effectively creating a "marriage penalty" for high-earning couples.
• If signed, this tax goes into effect on January 1, 2028.

The estimated $3.5 billion in annual revenue from Washington's millionaire tax would be earmarked for education and health care, sales-tax relief, and small-business credits.

Critics argue that the new tax will accelerate the state's wealth exodus and damage Washington's economic competitiveness with other states. For more information, check out Kiplinger's report, 9.9% Washington Millionaire Tax Approved: What's Next for High Earners?

Read More

• Washington State Tax Guide
• Washington Approves Capital Gains Tax Increase: Who Pays?
• Could a New Billionaire Tax Plan Put $3,000 in Your Pocket?